A Product of Wealth Securities, Inc.€¦ · Aboitiz Equity Ventures • AEV is still consolidating after the strong move in late February which pushed the price to 60. Both the MACD

A Product of Wealth Securities, Inc.

Index Value Change % Chg

PSEi 5,156.46 16.82 0.3251 All Shares 3,429.55 4.12 0.1203 Financials 1,302.79 6.95 0.5363 Industrial 7,894.01 24.61 0.3108 Holding Firms 4,357.17 53.81 1.2199 Property 1,933.32 7.92 0.4113 Services 1,699.87 3.53 0.2072 Mining & Oil 25,598.75 9.95 0.0389

US stocks gain on strong earnings

US stocks ended mostly up last Friday (Apr 20) as strong earnings from McDonald’s,

General Electric and Microsoft buoyed the market. The Dow and the S&P gained 0.50%

and 0.12% respectively while the Nasdaq ended 0.24% lower. Shares of Microsoft Corp.

jumped 4.5% higher after the company reported profits that beat analyst expectations.

General Electrics and McDonalds likewise edged higher after reporting higher quarterly

profits. Apple however declined more than 2.4%, weighing heavily on the Nasdaq. Another

Nasdaq component, Sandisk Corp., dropped more than 11% after warning that it sees a

decline in its Q2 revenues. Bank of America meanwhile fell 4.7% following a downgrade

from CLSA.

Vista Land successfully raises P4.5B

Villar-led Vista Land and Lifescapes, Inc., said in a statement over the weekend that it had

raised P4.5B through the issuance of domestic corporate notes. The notes were promptly

acquired by institutional investors and were upsized from P3B due to high demand. VLL

said that proceeds from the offering will be used to refinance old debt and for general

corporate purposes. The company said earlier that it is projecting P15B in capital

expenditures for 2012. BDO Capital and Investment Corp. and Investment and Capital

Corp. of the Philippines managed the said transaction.

Ayala Corp. to bid for LRT-1 extension project

Ayala Corp. officials said that the company is looking to bid for the extension and

management of the LRT-1. The government is set to publish the invitation to bid for the

project before the end of the month. The project is expected to cost around P30B and

comprises the management of the passenger rail and the extension of the railway by

another 11.7km to Bacoor, Cavite.

20 Apr 2012: 5,156.46 - 16.82 Value T/O, net Php 1,678 million 52-week High 5,145.89 Low 3,715.01 Foreign Buying: Php 8,176 million Foreign Selling: Php 4,713 million

Apr 10

GMA7 Results Briefing

Apr 11

ANS ASM

Apr 12

NI ASM

Apr 16

MWC Results Briefing

Index Movers Points

Aboitiz Equity -3.34

Ayala Corp -2.86 BDO Unibank +2.55

Alliance Global -2.01

Jollibee Foods -1.80

Index Out-performers Up

Robinson Land 3.35% BDO Unibank 2.54% Semirara Mining 2.26% Megaworld 1.49% Belle Corp 1.20% Index Under-performers Down

Metro Pac. Inv. 2.70% Jollibee Foods 2.68% Alliance Global 2.68% Aboitiz Equity 2.09% Ayala Corp 2.02%

Dow Jones 13,029.30 +0.50%

FTSE 100 5,772.15 +0.48%

NIKKEI 225 9,561.36 -0.28%

PNB to issue Tranche 2 of Tier 2 Notes

PNB said in a press release that the bank intends to launch the issuance of the second

tranche of its Fixed Rate Unsecured Subordinated Notes today. The said notes are

eligible as Tier 2 Capital. PNB said that it intends to sell P3.5B worth of the 10-year

notes. The initial price guidance for the notes is from 5.75% and 6.0% per annum and

will be callable after the end of the 5th year from the issue date. Proceeds from the

notes will be used to finance asset growth and at the same time, help the bank

maintain a strong capital base.

Foreign Buying-Selling : 12-month period

Source: PSE

US, Dollar 42.6320

Japan, Yen 0.5248

UK, Pound 68.3050 Hong Kong, Dollar 5.4930 EU, Euro 55.9374

Bahrain, Dinar 113.0882 Saudi Arabia, Rial 11.3682

China, Yuan 6.7640

As of 4/19/2012

NYMEX Crude Futures

103.05 +0.76%

%NY Gold Spot ($/t oz.) 1,640.40 +0.05%

Silver Comex ($/t oz.) 31.63 -0.28%

London Copper Spot 8,240.00 +1.85%

As of 04/20/2012

EQUITY RESEARCH FOCUS Wealth Securities Research

Core Holding

Bernard Aviñante Analyst - Conglomerates Jerome Gonzales Head of Research - Technicals

Conglomerates Sector

23 April 2012

• 8 of the 30 member stocks in the PSEi are holding companies

• GT will eventually be included in the PSEi; erstwhile member, FPH, lags behind the ranks

• Since size is a key benchmark, conglos will likely affect the re-balancing of MSCI, which factors in market cap

• JGS, DMC, and MPI are large cap but non-MSCI members

Price Returns vs. PSEi The Bigger the better

Conglos Dominate PSEi

In P’mn Market Cap Rank Market Cap Rank

SM 417,698 2nd DMC 153,488 14th

AEV 271,124 5th AGI 126,730 18th

SMC 265,369 7th MPI 106,496 21st

AC 240,275 9th GTCAP 77,736 N/A

JGS 229,144 10th FPH 36,071 N/A

Rank of Conglomerates in the PSE Index

-4.11%

7.15%

16.82%

18.31%

19.34%

22.29%

33.83%

35.19%

39.95%

17.94%

SMC

FPH

SM

MPI

AGI

AEV

AC

JGS

DMC

PSEI

• Premium valuation of AEV and DMC driven by superior ROEs

• SM’s huge landbank (valued at cost) compresses ROE; unable to trade at par with “outliers”

• High earnings growth companies showing modest ROEs.

P/BV vs. ROE

Value vs. Return

GTCAP

SM

SMC

AEV

JGS

AC AGI

DMC

MPI

FPH

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0

%

x

• We are bullish on the prospects of conglomerates, as they are the key drivers of the economy. Their market caps account for ~20% of GDP.

• We expect them to record profits of P131 billion, a growth of 31% in FY12. Sector P/E of 14.8x.

• Roll out of PPP project bids will be a key catalyst to the winning bidder.

• 6 of the 10 holding companies under our basket are Buys. We are still positive on the remaining 4, but the remaining upside potential could be less.

• Our top pick is JGS.

Our Bets in Conglos

Rating Target Rating Target

SM Hold 705.50 DMC Hold 62.70

AEV Hold 53.90 AGI Hold 12.75

SMC Buy 136.00 MPI Buy 5.10

AC Buy 486.00 GTCAP Buy 580.00

JGS Buy 39.90 FPH Buy 79.80

SM Investments

Financial & Valuation Highlights 2009A 2010A 2011A 2012E 2013E

Net Income, P’m 16,025 18,440 21,200 24,209 28,512

EPS, P 26.16 30.11 34.54 39.52 46.55

PER 25.2x 21.9x 19.1x 16.7x 14.2x

PBV 3.2x 2.8x 2.5x 2.2x 2.0x

ROE 13.58% 13.82% 14.08% 14.27% 14.75%

Dividend yield 1.0% 1.2% 1.4% 1.6% 1.8%

• Aggressive growth expansion plans across core businesses

• BDO entry point to non-core businesses (i.e. AT, SLEx)

• Ortigas & Co. acquisition catalyst to LT growth

• Earnings CAGR of 15% through FY14

Profit Mix Firing on all cylinders

Malls 27%

Retail 34%

Banks 27%

Property 12%

SM Investments

• Currently hovering at the 15% average NAV discount

• Float concerns could be partly addressed by CBs

• SM to re-appraise assets in FY13 – key catalyst to unlocking value of assets, especially the non-listed ones

Foreign Buying / Selling P/NAV Chart

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

+ 1 SD : 1%

- 1 SD : 30%

Mean discount: 15%

SM Investments • Tourism potential very promising,

whether core hotels, Pico de Loro, or Belle Grande – driver for non-listed assets

• Issued CBs totaling $250 million; strike price around our NAV estimate. Expected dilution very minimal at 2.3%.

• Net cash position of >$1 billion would fund acquisitions and growth aspirations.

• TP at P705.50 per share based on 10% target discount. Hold.

Sum of Parts: SM

Stake Value to SM (P’m) EV %

Listed Assets

SM Prime 53.0% 132,596 30%

SM Dev’t 43.6% 31,198 7%

BDO + CHIB 81,146 19%

BEL + HP 19,266 4%

Others 11,216 2%

275,423 63%

Non-listed Assets 163,700 37%

Enterprise Value 439,123 100%

Less: Parent net debt / (cash) (41,000)

Net Asset Value 480,123

NAV per share 783.87

Discount to NAV 13.3%

What the Chart says…

SM Investments

• SM appears to be on a new leg up. It has broken above a flag formation three weeks ago and has successfully retested the breakout level. The MACD and Stochastics indicators confirm this move upwards which should target the 730 to 750 levels.

Aboitiz Equity Ventures


Net Income, P’m 8,307 21,865 21,191 22,257 24,634

EPS, P 1.33 3.95 3.77 4.03 4.46

PER 37.6x 12.6x 13.3x 12.4x 11.2x

PBV 5.1x 4.3x 3.6x 3.0x 2.5x

ROE 15.20% 36.76% 29.92% 26.14% 24.26%

Dividend yield 0.5% 1.0% 3.2% 3.2% 3.2%

Profit Mix

• Growth anchored on AP’s prospects; capex skewed to power

• Greenfield projects to come ’14 and beyond, including plants in Mindanao grid

• Earnings to grow flattish in ‘12

Best yield among peers

Aboitiz Power 78%

City Savings

2%

Union 14%

Pilmico 6%

• Strong recipient of foreign buying, since larger peers SM and SMC have small float count

• AP’s float is tightly held, too, thus resorting to parent, AEV.

• Though bulk of earnings comes from AP, payout is higher at AEV

Aboitiz Equity Ventures Foreign Buying / Selling P/BV Chart Foreign Buying / Selling

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

+ 1.5 SD : 3.2x

- 1.5 SD : 0.4x

Mean multiple: 1.8x

• A move to increase stake in (or consolidate UBP) should be NAV enhancing

• Looking at PPP as avenues for growth, but not bidding on the ones in the priority list

• Despite modest profit growth, high payout ratio drives up ROE

• Difficult to value on NAV, but premium P/B could be warranted by high ROEs

• At 3.2x P/B, fair value is P53.90. Hold.

Sum of Parts: AEV


Stake Value to AEV (P’m) EV %

Listed Assets

Aboitiz Power 75.3% 207,800 78%

UnionBank 49.5% 33,343 12%

241,143 90%



Less: Parent net debt / (cash) 1,247


NAV per share 47.84

Premium to NAV 4.5%



• AEV is still consolidating after the strong move in late February which pushed the price to 60. Both the MACD and Stochastics indicate that the stock is ready to move in the next few days. A break above 51 would indicate the start of a new leg up.

San Miguel Corporation


Net Income, P’m 5,888 14,268 11,677 16,320 21,149

EPS, P 3.08 8.62 6.85 8.66 10.55

PER 4.5x 13.0x 16.4x 12.9x 10.6x

PBV 1.9x 1.8x 1.5x 1.4x 1.2x

ROE 4.18% 10.04% 7.24% 8.75% 10.38%

Dividend yield 0.9% 6.0% 0.9% 0.9% 0.9%

Profit Mix

• Takes over PAL buying 49%

• Petron to purchase Exxonmobil Malaysia

• On telecom, SMC could be the next value-for-money player

• Earnings dramatically shifting to non-consumer businesses

Hungry for growth

GSMI1%

Pack4%

Meralco9% SM Brew

18%

Petron22%

SMGP35%

PF11%

• SMC has clearly lagged behind peer conglomerates, with share price barely above the P110 offer.

• In spite of the value and growth it offers, investors are less optimistic given issues with gearing.

San Miguel Corporation P/NAV Chart Foreign Buying / Selling

-60%

-40%

-20%

0%

20%

Dec

-09

Dec

-10

Dec

-11

Dec

-12

+ 1 SD : -26%

- 1 SD : -55%

Mean discount: 41%

• Acquisitions offer synergies within the group (e.g., PAL on Petron).

• SMC is trading at >50% discount to NAV, highest discount among conglomerates

• A series of capital raising exercises at the parent and subs levels would reflect inherent value of SMC.

• A reversion to mean discount of 41% translates to a fair value of P136. Buy.

San Miguel Corporation Sum of Parts: SMC

Stake Value to SMC (P’m) EV %

Listed Assets

Beer & liquor group 127,848 19%

Food group 64,985 10%

Petron 68.0% 89,250 13%

Meralco 33.2% 84,405 12%

366,488 54%




Less: Preferreds 72,788





San Miguel Corporation

• SMC has been trading with decreasing volatility since December. Strong support is seen at 110 while resistance is pegged at 116. A break above the short-term downtrend line would push the stock towards 116.

Ayala Corporation


Net Income, P’m 6,568 11,161 9,395 12,046 14,345

EPS, P 11.05 13.07 15.71 22.37 27.05

PER 38.4x 32.5x 27.0x 19.0x 15.7x

PBV 1.6x 1.7x 1.6x 1.5x 1.4x

ROE 4.29% 5.10% 6.00% 8.20% 9.38%

Dividend yield 0.9% 0.9% 1.4% 1.0% 1.5%

Profit Mix

• Healthy mix of profit drivers, with banking and real estate as key catalysts

• Infra and power will take time to materially contribute, but add spark to mature businesses.

• Earnings CAGR of 25% through 2014

Infra & power add spark

ALI 30%

BPI 33%

MWC 14%

GLO 23%

• Up 34% YTD, on renewed optimism because of its diversification plans.

• Since winning the Daang Hari project, investors flocked the stock.

• Well on its way to 10% discount to NAV

P/NAV Chart

Ayala Corporation Foreign Buying / Selling

-60%

-40%

-20%

0%

Dec

-09

Dec

-10

Dec

-11

Dec

-12

+ 1 SD : 22%

- 1 SD : 46%

Mean discount: 34%

• ALI is on track to achieving 5-10-15; BPI viewed as an acquirer; GLO benefits from reversion to duopoly; and MWC to get equitable tariff rate hike.

• Other businesses are expected to turn the corner.

• Very manageable debt profile: avg. maturity = 5yrs and cost of debt = 5.7%

• At 10% conglomerate discount, our fair estimate for AC is P486. Buy.

Ayala Corporation Sum of Parts: AC

Stake Value to AC (P’mn) EV %

Listed Assets

Ayala Land 53.6% 153,567 48%

BPI 33.5% 81,548 25%

Manila Water 43.1% 21,604 7%

Globe Telecom 30.5% 50,325 16%

IMI 67.8% 4,618 1%

311,663 96%








Ayala Corporation

• AC broke out of a flag pattern a week ago and has resumed its uptrend. Both the MACD and Stochastics indicate that there is still upside left which could push AC towards its all-time high of 448.

JG Summit Holdings


Net Income, P’m 5,888 15,570 8,560 17,864 21,546

EPS, P 0.87 2.31 1.27 2.65 3.20

PER 39.3x 14.7x 26.8x 12.8x 10.6x

PBV 2.2x 1.5x 1.3x 1.2x 1.1x

ROE 8.15% 12.83% 13.48% 9.96% 10.85%

Dividend yield 0.1% 0.1% 0.2% 0.2% 0.2%

Profit Mix

• Entry into TEL, the game-changer

• EPS to more than double to P2.65, P/E lower than PSEi’s

• Exposure to commodities, however, creates vulnerability.

• The cheapest among conglos in spite the 35% YTD run-up

On to summit

RLC19%

URC38%

CebuAir

21%

PLDT17%

Others5%

• Sale of JGS shares held by subs increased the free float, allowing greater foreign participation.

• Among the non-MSCI but PSEi-member companies, JGS has the largest market cap.

P/NAV Chart

JG Summit Holdings Foreign Buying / Selling

-60%

-40%

-20%

0%

20%

Dec

-10

Dec

-11

Dec

-12

+ 1 SD : -13%

- 1 SD : -38%

Mean discount: 25%

• With TEL under its fold, EV has become more diverse.

• Significantly improved balance sheet, giving firepower in the PPP space

• Can afford to increase dividend payout – currently <10%

• Inclusion in MSCI should be a huge catalyst – both ST and LT

• At 10% discount, our upgraded TP of P39.90 implies 17% upside. Buy.

JG Summit Holdings Sum of Parts: JGS

Stake Value to JGS (P’m) EV %

Listed Assets

Universal Robina 61.4% 95,246 34%

PLDT 8.0% 51,405 19%

Robinsons Land 60.0% 32,813 12%

Cebu Air 67.0% 30,815 11%

United Industrial 35.9% 46,875 17%

257,155 90%





NAV per share 44.29



JG Summit Holdings

• JGS traded between 18.50 and 28.0 from September 2010 to March 2011. It broke above this wide rectangle pattern two weeks ago which would point to a target of 37.50.

DMCI Holdings

Financial & Valuation Highlights 2009A 2010A 2011E 2012E 2013E

Net Income, P’m 4,407 7,867 9,047 10,931 13,876

EPS, P 1.66 2.71 3.41 4.12 5.18

PER 34.8x 21.3x 17.0x 14.0x 11.2x

PBV 7.5x 5.7x 4.6x 3.7x 2.9x

ROE 22.96% 33.17% 30.01% 29.17% 29.15%

Dividend yield 0.3% 0.9% 1.7% 2.1% 2.1%

Profit Mix

• Power will become the largest contributor to earnings by ‘14

• New coal supply to mitigate long-term supply risk

• Orderbook at P22 billion, upside potential from PPP

• 7 projects under the DMCI Homes

High growth, high ROE

Power 18%

Mining 35% Water

19%

Property 15%

Cons’n 13%

• Best performer among peer conglomerates, up 40% YTD

• Steps up DPS by 20% = 35% payout

• Like AEV, trades at premium on P/B and P/NAV

• More foreign buying expected once included in MSCI

P/BV Chart

DMCI Holdings Foreign Buying / Selling

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

+ 1.5 SD : 4.0x

- 1.5 SD : 0.4x

Mean multiple: 2.2x

• PPP beneficiary – a participant and a contractor for a winning bidder

• Marubeni entry unlocks value of unlisted Maynilad; windfall cash

• Zero debt & ~$100m cash = acquisition mode: raw land and mine sites eyed

• Dividend yield one of the highest among peers

• At 4.0x P/B, which is 1.5 std deviation from its average multiple, we arrive at a P62.70 TP. Hold.

DMCI Holdings Sum of Parts: DMC

Stake Value to DMC (P’m) EV %

Listed Assets

Semirara 55.1% 51,817 35%





NAV per share 57.39

Premium to NAV 3.2%


DMCI Holdings

• DMC broke out of its flag formation a few days back. The strong uptrend is very much intact and the next resistance level is at 60.6, followed by 64.

Alliance Global

Financial & Valuation Highlights 2009A 2010A 2011E 2012E 2013E

Net Income, P’m 4,796 6,908 9,501 12,251 14,438

EPS, P 0.49 0.71 0.93 1.19 1.41

PER 25.1x 17.4x 13.3x 10.3x 8.8x

PBV 2.3x 2.1x 1.9x 1.6x 1.4x

ROE 10.03% 12.61% 15.20% 16.94% 17.12%

Dividend yield n/a 0.5% 2.9% 2.9% 2.9%

Profit Mix

• Success in BPO replicated in IR; first mover advantage slowly eroding though

• Property remains largest profit contributor, but pressured by bigger rivals

• Earnings growth to temper in ‘13

Coming soon: Competition

MEG 39%

EB 25%

GADC 4%

RWM 32%

• Enjoys a good flow of foreign buying

• AGI is already above 1SD from its historical mean discount

• Incoming competition could pressure NAV discount and revert to mean…. unless it could show that the market is enough for all of them

P/NAV Chart

Alliance Global

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

Dec

-09

Dec

-10

Dec

-11

Dec

-12

+ 1 SD : -16%

- 1 SD : -51%

Mean discount: 33%

Foreign Buying / Selling

• Concrete plans on RW Bayshore would be announced by 2H; likely listing of Traveller’s

• Emerging new casino players, BLOOM and BEL, could initially siphon traffic from RWM next year

• Tourism flavor via GERI looks promising; capital raising may be in the pipeline

• At 10% conglo discount, we see minimal upside with our P12.75 target. Hold.

Sum of Parts: AGI

Alliance Global

Stake Value to AGI (P’mn) EV %

Listed Assets

Megaworld 56.7% 32,708 23%

Global Estate 59.9% 10,622 7%

43,329 30%





NAV per share 14.21



Alliance Global

• AGI broke above the previous peak of 13.12 (established in December 2010) last month, reaching a high of 13.48. It has since fallen back to as much as 11.66 but is attempting to rally past 13.12 again. A successful break should point to 16, followed by 17.30.

Metro Pacific Investments


Net Income, P’m 2,300 2,871 5,059 7,207 8,641

EPS, P 0.10 0.17 0.21 0.29 0.35

PER 42.6x 24.9x 20.9x 14.8x 12.3x

PBV 1.7x 1.8x 1.4x 1.4x 1.3x

ROE 4.49% 5.44% 7.91% 9.45% 10.56%

Dividend yield n/a 0.2% 0.6% 0.7% 0.9%

Profit Mix

• Rate rebasing at Maynilad is key to profit growth; starts ‘13.

• Meralco enters power gen in time as distribution tariffs appear flat

• PPP provides avenue for add’l growth; BS has elbow room

• ‘12 earnings to grow 42%

Still expanding

• P/NAV discount narrowing and moving to 2 S.D.

• Increased foreign participation

• Likely candidate for MSCI inclusion considering market cap expansion

Foreign Buying / Selling P/NAV Chart


-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Dec

-09

Dec

-10

Dec

-11

Dec

-12

+ 2 SD : -23%

- 2 SD : -52%

Mean discount: 38%

• Entry of Marubeni could potentially unlock the value of Maynilad

• Delayed SCTEX turnover continues to be a drag, profit and value-wise

• Subsidiaries up-stream P1.4 billion in annual cash dividends

• Current net cash position reduces balance sheet drag; can opt to look for further acquisitions

• At a 23% target discount, we upgrade our TP to P5.10. Buy.

Sum of the Parts: MPI

Stake Value to MPI (P’mn) EV %

Listed Assets

Meralco 22.7% 77,434 44%

MPTC 99.9% 39,779 27%

117,153 73%





NAV per share 5.10





• MPI has been consolidating between 4 and 4.31 the past four weeks. The Stochastics indicator shows that the stock may be on the verge of forming a new leg up. Resistance is seen in the 4.30 to 4.45 range. Only a successful break above 4.45 would indicate a move towards the next resistance level at 4.90.

GT Capital Holdings

Financial & Valuation Highlights 2010A 2011A 2012E 2013E

Net Income, P’m 2,872 3,206 4,794 5,688

EPS, P 24.01 26.59 30.34 36.00

PER 20.5x 18.5x 16.2x 13.7x

PBV 2.1x 1.8x 1.0x 0.9x

ROE 10.63% 10.30% 8.57% 7.13%

Dividend yield n/a n/a n/a n/a

Profit Mix

• GBP and Fed to comprise topline while the rest are derived via equity earnings.

• IPO proceeds to be channeled for consolidation; may be a concern for some.

• Expect high profit trajectory in ‘12

Great Timing

Metro 51%

Fed Land 19%

Global 16%

Toyota 9%

AXA 5%

• Healthy mix of listed and non-listed assets

• We see GBPP and TMP as value drivers.

• GBPP has a sizeable presence in Visayas grid – 426MW of net dependable and attributable capacity.

• Fedland and Toyota complement consumer banking portfolio of PSBank.

• Ascribing a 10% conglomerate discount, our initial TP is P580. Buy.

Sum of the Parts: GTCAP

GT Capital Holdings

Stake Value to GT (P’mn) EV %

Listed Assets

Metrobank 25.1% 54,586 53%







First Philippine Holdings


Net Income, P’m (226) 1,290 2,075 3,554 5,728

EPS, P (0.38) 2.18 3.69 6.32 10.19

PER n/a 30.2x 17.9x 10.4x 6.5x

PBV 1.2x 0.7x 0.6x 0.6x 0.6x

ROE n/a 1.62% 2.95% 5.41% 8.67%

Dividend yield 1.5% 3.0% 3.0% 3.0% 3.0%

Profit Mix

• Earnings to be driven by EDC

• One-time gain of P3 billion this 1Q from sale of 2.7% MER

• Consolidation of Rockwell to propel profits

• Cheapest on all valuation metrics

Time to reconsider

FGEN41%

Rockwell18%

MER41%

• One of the laggards among conglomerates, with foreigners selling

• Once Rockwell is consolidated and if EDC delivers this September, expect a run-up.

P/NAV Chart

First Philippine Holdings Foreign Buying / Selling

-60%

-50%

-40%

-30%

-20%

-10%

0%

Dec

-09

Dec

-10

Dec

-11

Dec

-12

+ 1 SD : -34%

- 1 SD : -46%

Mean discount: 40%

• Fairly conservative approach; sits on net cash of P8 billion

• Possible deployment to FGEN via Series G

• Rockwell LBI could be this year; good prospects on property segment

• Eyes projects at EDC and FGEN levels – BG still not moving

• Stock is very cheap at 46% discount. TP is P79.80. Buy.

Sum of Parts: FPH


Stake Value to FPH (P’m) EV %

Listed Assets

Meralco 3.9% 13,454 22%

First Gen 66.2% 34,519 55%

47,973 77%




Less: Preferred shares 4,300






• Since reaching 72 in Sept 2010, FPH has been consolidating sideways on a wide band (51 - 72), making a huge pennant pattern. In Dec 2011, this pattern was broken to the upside. FPH is now poised to test 72. A break above 72 would catapult FPH to the next resistance level at 79, followed by 92 which is the all-time high.

• Over the next six to twelve months, Wealth Securities expect the share price to increase by 12% or more

BUY

• Over the next six to twelve months, Wealth Securities expect the share price move within a range of +/-12%

HOLD

• Over the next six to twelve months, Wealth Securities expect the share price to decline by 12% or more

SELL

http://www.wealthsec.net/

mailto:[email protected]






Documents

A Product of Wealth Securities, Inc.€¦ · Aboitiz Equity Ventures • AEV is still consolidating after the strong move in late February which pushed the price to 60. Both the MACD